Apple found guilty in e-book price fixing case

E-book prices went up after Apple jumped into the market following the iPad's release in 2010, and those price hikes were the result of collusion between Apple and major book publishers. That's the gist of today's ruling by New York District Judge Denise Cote in a high-profile price-fixing suit against Apple.

According to Reuters' coverage of the story, Amazon once had a 90% share of the e-book business and sold e-books for $9.99 a piece—allegedly "below cost." Around late 2009, Apple is said to have entered "agency agreements" with publishers like Hachette, HarperCollins, Penguin, Simon & Schuster, and Macmillan. Those agreements allowed publishers to raise prices and pay commission to Apple. Amazon was allegedly "pushed into a similar business model," and as a result, some e-book prices rose from $9.99 to $12.99 or even $14.99.

According to the Judge's opinion, "Apple is liable here for facilitating and encouraging the Publisher Defendants' collective, illegal restraint of trade. Through their conspiracy they forced Amazon (and other resellers) to relinquish retail pricing authority and then they raised retail e-book prices. Those higher prices were not the result of regular market forces but of a scheme in which Apple was a full participant."

Judge Cote's opinion includes some damning quotes from e-mails sent by Steve Jobs to publishers. One of them says in part, "The current business model of companies like Amazon distributing ebooks below cost or without making a reasonable profit isn't sustainable for long." It adds, "All the major publishers tell us that Amazon's $9.99 price for new releases is eroding the value perception of their products in customer's minds, and they do not want this practice to continue for new releases." Jobs also urged publishers to "move Amazon to the agent model too for new releases for the first year," adding, "If they don't, I'm not sure we can be competitive."